Second-hand car dealers, lawyers to be probed over 'wash wash' links

Local second-hand car dealers as well as lawyers are set to be probed over potential links to money laundering.

This is according to a new report dubbed the Money Laundering and Terrorism Financing National Risk Assessment which has recommended that the dealers and lawyers be subjected to AML/CFT requirements.

The motor vehicle dealers industry has been flagged as a sector highly vulnerable to money laundering and terrorism financing abuse.

At the same time, the legal sector has been viewed as highly vulnerable to the same abuses largely due to the role played by lawyers in relation to their client’s transactions.

The report now recommends that both industries be placed under the ambits of anti-money laundering-countering financial terrorism requirements.

Currently, motor vehicle dealers do not fall under the Financial Action Taskforce (FATF) which has the backing of G7 countries and which birthed policies to combat money laundering across the globe.

“Whereas the FATF recommendations are not applicable to motor vehicle dealers, the National Risk Assessment (NRA) found that motor vehicle dealers’ industry, especially second-hand dealership, is highly vulnerable to money laundering and financing terrorism abuse in the country,” noted the report.

Second-hand car dealership is a lucrative industry with more than three-quarters of motor vehicles sold in the country coming from the sector according to data from multiple sources.

The proliferation of the second-hand car market is mirrored by growing car sale yards along major roads in Kenya’s Capital City Nairobi including Kiambu Road and Ngong Road.

The banking industry has nevertheless been assessed as the sector with the highest impact on national money laundering vulnerability due to the role played by banks in the economy.

The lenders are nevertheless under the ambit of AML/CFT requirements where the Central Bank of Kenya (CBK) oversights compliance including enforcing rules such as the reporting of cash transactions above Ksh.1 million.

Real Estate, mobile remittance providers (MRPs), Savings and Credit Cooperatives (Sacco’s) have also been assessed as vulnerable sectors due to the nature of industries as well as weak frameworks on money laundering, terrorism financing and proliferation financing (PF) oversight.

Money laundering risks in sports betting has been assessed as low for betting individuals but high for the owners of betting companies.

The common methods of laundering money in Kenya have been assessed as the opening of suspicious bank accounts and the making of periodic deposits which do not correspond to the suspects’ known sources of income.

Other crimes related to money laundering include fraud and forgery, corruption, drug trafficking, environmental crimes and tax evasion.

The proliferation of money laundering in the country has seen the coining of the phrase ‘wash-wash’ which proverbially references the ‘cleaning’ of cash obtained through illegal means.

The Central Bank of Kenya (CBK) the National Risk Assessment Report affirming its commitment to combat money laundering and financial terrorism violations.

“CBK is committed to continue working with the sector and other players in implementing actions indicated in the Strategy and Action Plan to strengthen the banking sector AML/CFT supervisory and regulatory framework. This will play a critical role in maintaining and enhancing Kenya’s standing as a premier financial services hub in Eastern Africa,” CBK said in a statement on Wednesday.